Not So Magic, Jack - Intellectual Property Analysis of Personal Voice Freedom, LLC v. YMAX Corporation et. al

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On November 9th 2010, Personal Voice Freedom (PVF) filed an infringment suit against YMAX Corp. as well as its subsidiaries magicJack LP and TigerJet Network Inc. In an effort to fight off the case, magicJack filed for a reexamination of the asserted patent, US 7,336,654 with the United States Patent and Trademark Office (USPTO) in November of 2011. The patent was reissued with amended claims and magicJack has subsequently appeared to enter a settlement agreement with PVF.

This lawsuit is just the latest problem for magicJack in a long line of legal and operational issues. The company was involved in a dispute with the Federal Communications Commission (FCC) over the collection of 911 emergency fees in September, 2010 when the FCC issued a notice of inquiry. The company was not collecting the proper fees from its customers, who continued to receive the same access to 911 emergency services as regular landline customers who paid their fees. magicJack customers apparently are now subject to the fees, priced based on the jurisdiction in which they live.

In April of 2011, AT&T filed a complaint with the FCC alleging that magicJack was collecting unjust termination fees on calls to magicJack numbers. The FCC ruled that magicJack could no longer collect these termination fees, a considerable blow to a company that had already been losing money for the last four consecutive years. Although the company said that this would not be a significant blow to their income, revenue for the second quarter of 2011 fell 4.2%.

Scammers have made aggressive use of magicJack technology to disguise their phone number and pose as a legitimate business. The company did not help its own reputation even more when it finally acquired a patent, US 6,731,751 (the ‘751 patent), on April 3, 2012, and immediately asserted it in an infringement suit against NetTalk.com.

As magicJack had few options at the time to defend itself against PVF, in late 2011 it filed a reexamination request on the ‘654 patent, which was subsequently granted by the USPTO. Although the company treated this as a win, the USPTO’s decision to reissue the ‘654 patent with minimal changes to its claims seems to have put the odds back in PVF’s favor.